Tough times for exporters due to coronavirus outbreak as buyers request to holdback shipments
The micro, small, and medium enterprises (MSMEs) are likely to be the worst affected due to the coronavirus outbreak, particularly in the first quarter of FY 2020-2021, the Federation of Indian Exports Organisations (FIEO) said in a statement.
According to the release, employment-intensive sectors like carpets, handicrafts, apparels, footwear, gems and jewellery, marine, and perishable, with their major market in Europe and the USA, are odds-on as per the current trend.
“The spread of coronavirus to over 144 countries points to the most challenging times for the exports sector. The virus is likely to expand to many more countries. Near lockdown and quarantine in many advanced economies has given a jolt to the demand and has added to the rising uncertainties with looming recession in large number of economies with consequent fallouts,” said Sharad Kumar Saraf, President, FIEO.
He added that while they are emboldened by the government’s statement that coronavirus has hitherto not impacted the Indian economy, yet the export sector has started feeling the pinch with many requests from buyers to hold back shipments till further instructions.
“We feel that a significant number of such requests may eventually lead to cancellation of orders. Even in cases where Indian exporters are adhering to the terms of contract, the force majeure clause is likely to be invoked by buyers to deny claim/liability raised by exporter,” said Saraf.
Saraf said that he is confident that the government will do its best to support the industry and exports sector in such challenging times. However, since all businesses (with few exceptions) will take a hit in revenue and margins, with fixed cost remaining the same, they have requested the government to consider the following, which may not cost the exchequer a lot.
They have asked banks to enhance the working credit limit of the exporters and to delay the declaring companies’ accounts as NPA for one year as lack of business coupled with fixed cost will make many accounts NPAs.
The organisation has also requested the government to encourage Indian missions abroad/EPCs to organise buyer-seller meets over video-conferencing particularly in respect of identified potential products in specified markets.
It also requested for collateral-free lending of up to Rs two crore to MSMEs, suitable corpus to ESI extension of the remittance period from nine months to 15 months.
Saraf also said that if the situation improves rapidly in the second quarter of the next fiscal, Indian exporters may gain in some products so as to offset the losses. However, at this point of time, survival of many MSME exporting units looks challenging.
(Edited by Megha Reddy)